This article has been written by Manisha Singh, a 5th year B.A. LL.B (Hons.) student at University School of Law & Legal Studies, Guru Gobind Singh Indraprastha University.
The Competition Commission of India (“CCI”) has been established under Competition Act, 2002 (“Act”) to investigate any cases and/or complaints that come before it. To fulfil the primary function of the CCI which is to conduct enquiries into contraventions of any of the provisions of the Act, the Director General (“DG”) is appointed by the Central Government.
Essentially, an inquiry is initially conducted by the CCI either upon receipt of a reference or its own knowledge or information received in accordance with either Section 19 for anti-competitive agreements, abuse of dominance. For combinations, inquiry is conducted under Section 20 of the Act. The Commission has to come to a prima facie opinion that a case exists and once it comes to such conclusion it directs the DG to conduct an investigation.
Inquiry and Investigation into Anti-Competitive Agreements and Abuse of Dominance: [1]
The procedure of inquiry by the CCI is enumerated under Section 19 of the Act i.e. inquiry in cases of certain agreements alleged to be in contravention of the Act or information alleging abuse of dominant position by an enterprise, is conducted by the Commission in the manner explained below:
The CCI upon receipt of reference or its own knowledge or information received under Section 19 with regard to anti-competitive agreement or abuse of dominance, has to come to a prima facie opinion that a case exists and once it comes to such conclusion, it shall direct the DG to make an investigation into the matter.[2] If the CCI does not find a prima facie case, it will close the case, pass an appropriate Order and forward the Order to the concerned persons.
DG is required to submit a report on his findings to the CCI within the time as may be specified by the Order of the Commission such that:
- If the DG recommends that no case of anti-competitive agreement or abuse of dominance exists and/or there is no contravention of the provisions of the Act, the CCI shall invite objections/suggestions from the concerned parties [3]. Upon consideration of these objections or suggestions if CCI agrees with the DG, it shall close the matter. If CCI does not agree with the recommendation of the DG, it may order further investigation by DG or may itself conduct further investigation.
- If DG in its report recommends, that there is a contravention of the provisions of the Act and the CCI is of the opinion that a further inquiry is required, it shall investigate into such contravention in accordance with the provisions of the Act.
It was observed in CCI v SAIL,[4] that at the very onset the CCI enquires into the matter and if, at the inquiry level, it is of the opinion that prima facie a case for contravention exists then, it directs the DG to investigate into the matter under Section 26 of the Act.
The scope of investigation by DG was discussed in Excel Crop Care Limited v. Competition Commission of India & Another.[5] In this case, the SC was of the view that the DG should investigate the matter in accordance with the direction given by the CCI. The SC found that the purpose of a DG investigation is to, “cover all necessary facts and evidence in order to see as to whether there are any anti-competitive practices adopted by the persons complained against”. Therefore, “the starting point of the inquiry would be the allegations contained in the complaint” but during the course of the investigation “if other facts also get revealed and are brought to light”, according to the SC, “the DG would be well within his powers to include those as well in his report”.
The SC has decided the above on the basis that at the initial stage, the CCI “cannot foresee and predict whether any violation of the Act would be found upon the investigation and what would be the nature of the violation revealed through investigation”. Accordingly, the SC holds that a restriction of the investigation process “would defeat the very purpose of the Act”.
Therefore, the order passed by the SC has broadened the boundaries/ paradigm of DG investigations. The DG is well within its power to investigate other facts regarding a contravention (not considered by the CCI) which the DG discovers later, during the course of the investigation.
Inquiry and Investigation into Combination by CCI: [6]
Section 20 of the Act empowers the Commission to inquire into whether a combination has an appreciable adverse effect on competition in the relevant market in India. The commission can initiate inquiry upon its knowledge, on information received or a reference received from the central government, state government or a statutory authority. The law provides for several filters before the Commission can commence an inquiry against a proposed transaction of combination. These are:
- If the result breaches the statutory thresholds;
- Prima facie causation of appreciable adverse effect on competition in the relevant product and geographic market within India.[7] Factors relating to ascertaining appreciable adverse effect on competition have been statutorily provided in the law, thereby, minimising arbitrariness. [8]
- Local nexus or “de minimis” thresholds have been provided under the law for overseas transactions having adverse effect in India. Cross-border transactions which do not exceed the statutory “de minimis” thresholds shall be exempted from being inquired into by the Commission.[9]
- Government-aided enterprises are not exempted from being scrutinised thereby ensuring a level-playing field between private and public sector competing enterprises.[10]
Section 20(4), by way of guidance, casts an obligation to have due regard for all or any of the factors mentioned in the said provision while determining whether a combination has appreciable adverse effect on competition in the relevant market or not.
On coming to a prima facie opinion that the combination is likely to cause or has caused appreciable adverse effect on competition within the relevant market: [11]
- The commission shall issue a show cause notice to parties to the combination calling upon them to show cause within 30 days of receipt as to why investigation of such combination should not be conducted.
- After the receipt of the response from the parties, the commission may call for a report from the DG in the time as may be specified.
- After receipt of the response and the report of the DG, if the commission is of the prima facie opinion that the combination has or is likely cause appreciable adverse effect on competition, it may direct the parties to publish the details of such combination within 10 days of such direction for the knowledge of general public and the persons affected or likely to get affected by such combination.
- The public or the effected parties are required to file their objections/suggestions, if any, with 15 days of such publication.
- Within 15 days of the aforementioned period of 15 days, the commission may call additional information from the parties to the combination.
- The parties are required to submit the additional information with 15 days of the after expiry of 15 days during which the information was sort.
- The Commission is mandated to proceed with the matter within 45 days of the expiry of the 15 days provided for furnishing the additional information.
Hence, as illustrated in the chart above, the Commission initiates under Section 19, an inquiry upon its own knowledge, on information received or on a reference received from Central Government, state government or a statutory body, into whether a combination has an appreciable adverse effect on competition in the relevant market in India or not. Upon coming to prima facie opinion that the combination is likely to cause or has caused an appreciable adverse effect, the Commission will investigate the matter in accordance with Section 29 of the Act.
ENDNOTES
[1] Sections 19 and 26 of the Act.
[2] Section 26(3) of the Act; the DG does not have any suo moto powers and cannot initiate any inquiry on its own.
[3] The Act does not empower the CCI to invite objections/suggestions from general public. Objections/ suggestions are limited to the concerned persons i.e. if there is reference then to Central and State Governments or the statutory authority and if the inquiry is based on information then to the person who has provided such information.
[4] Page 15, para 28, (2010) 10 SCC 744.
[5] Page 25, para 36, (2017) 8 SCC 47.
[6] Sections 20 and 29 of the Act.
[7] Sections 2(r), (s), (t) read with Sections 19(5), (6) and (7).
[8] Section 20(4) of the Act.
[9] Section 5 of the Act.
[10] Section 2(h) read with 2(1).
[11] Section 29 of the Act.
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